Transcript FLIR official PowerPoint template - UCCS

BRAZIL LEGAL
REQUIREMENTS
TAXES
7/17/2015
● Introduction
● Main Taxes
Topics
● Main Tax Books and Accessory Obligations
● SPED
● Substituição Tributária
● Off Set rules
● Statute of Limitations
● Tax Incentives
● Accounting Practices in Brazil
● Banking communication
Introduction
Corporate Tax in Brazil
• The
Brazilian tax system is based on
• the Federal Tax Code of 1966
• the Federal Constitution of 1988.
• There are three jurisdictions and tax collection levels in Brazil
• Federal
• State
• Municipal
• The Federal Tax System is managed by the Receita Federal do Brasil – RFB, which is
part of the Ministry of the Economy. States and municipalities have similar structures.
Introduction
Corporate Tax in Brazil
Basic tax requirements to operate in Brazil
• The company needs to define in the Article of Incorporation, the types of activities that it
will perform (services, sales, manufacturing, distribution, etc);
• The Article of Incorporation needs to be registered in the Registry of Commerce (Junta
Comercial);
• In addition, such entity must be registered in:
• the Federal Tax Authorities - CNPJ
• the State Tax Authorities – State Inscription (depending on the activities performed)
• the Municipal Tax Authorities – Municipal Inscription
• the Social Security System
• the Central Bank and Siscomex System (for import process)
Nota Fiscal - Invoice

According to the Brazilian Tax Legislation, it’s mandatory that any commercial transaction
(involving goods or services) or any goods movement have a invoice (Nota Fiscal), even that
it can be exempted of taxes. Examples:
- Raw or packaging material sale;
- Finished goods sale or resale;
- Return goods to the Supplier;
- Send fixed assets to be repaired in a third party;
- Send raw and packaging material to be manufactured in a third party;
- Transfer finished goods from a facility to a distribution centre;
- Render services (maintenance, cleaning, manufacture, etc)
 Nowadays the invoice needs to be printed in a special form;
 To print these forms, the company needs to have a previous authorization from the Tax
Authority (AIDF). Generally the Tax Authority authorize the company to print a determined
number of forms (example 1.000 forms).
Main taxes
Federal
Tax on Income
State
Municipal
Social Security
ISS
INSS
IR (or IRPJ)
CSLL
Sales and Purchase
taxes on products
IPI
ICMS
PIS / COFINS
Import
Tax on services
PIS / COFINS
ICMS
Funrural
Tax on property
ITR
IPVA
IPTU
ITBI
Others
IOF
CIDE
• Tax rate can vary according to State, product, Municipality or service
• Taxes are applied at different points in the process (example sales or services taxes
can be calculated and paid in the invoice and/or in the tax closure book).
Main taxes
Taxes
Definition
IR (or IRPJ)
Income tax
CSLL
Income tax - Social Contribution Tax on Profits
IPI
Tax on the manufacturing and import of goods
ICMS
Tax on the movement of goods (including the import of
products, electricity, inter-municipal and interstate
transportation services and communication services)
PIS / COFINS
Tax on revenues
Import tax
Tax on import
ISS
Tax on services
CIDE
Tax on the import of services and the payment of royalties
IOF
Tax on credit, exchange, insurance transactions and
intercompany loans.
Legal Reporting – Tax books
Main Tax Accessory
Obligations
 For 2010 Axis doesn´t have the obligations in red.
Federal
DIPJ
DIRF
DACON
GFIP
DCTF
SPED
DEREX
BACEN
State
Sintegra / Sintegra ST
GIA
GIA ST
CIAP
EFD
EFD PIS/COFINS
EFD CIAP
NFE
City
DES
GISS
DMS
NFE
SPED – Sistema Público de
Escrituração Digital
• SPED
is an electronic instrument that unify the activities of receipt, validation, storage and
authentication of the tax books.
• Due to the implementation of SPED, certain accounting and fiscal books in paper format are
substituted by an electronic format.
• SPED regarding digital accounting bookkeeping will have to be delivered before June 30,
2009, with respect to transactions that occurred in 2008 for those entities that were notified.
Other companies will deliver SPED in 2010 with regards to transactions having occurred in
2009.
• SPED regarding digital fiscal bookkeeping will be delivered from 2009 considering the
transactions occurred in 2008. Each State will determine the date of delivery.
Substituição
Tributária
Substituição Tributária was implemented by the Brazilian government with the objective to
guarantee that the taxes generated in all phases of the supply chain are collected.
In other words, the big company became responsible for the payment of the small one that
came after in the supply chain.
This is applicable to special situations. It depends on the type of the commercial transaction.
There are 3 regimes, defined by the Tax Authority to calculate the ST:
- “Margem de valor agregado” (margin of aggregated value give by the government )
- “Valor pauta” ( Std Value give by the government )
- “Preço sugerido ao consumidor” (price suggested to the consumer define by the industry
sector)
(*) ICMS base considering that the commercial transaction
occur in the same state
(**) rate defined by the Tax Authority based on the type of
good
Substituição Tributária
(not Applicable for sales to distributor)
State A
State B
Distributor
Commercial
Transaction 1
TOTAL
Commercial
Transaction 2
Sales
Invoice
Sales
Invoice
Without ST - Distributor
With ST – Distributor
Without ST - Distributor
Customer
This Commercial
Transaction is exempt of
Tax (ICMS)
With ST - Distributor
Invoice Value 2000.00
Invoice Value 2000.00
Invoice Value 2976.75
Invoice Value 2976.75
ICMS base
2000.00
ICMS base
2000.00
ICMS base
2976.75
ICMS base
0.00
ICMS value
360.00
ICMS value
360.00
ICMS value
506.05
ICMS value
0.00
ICMS ST
146.05
ICMS Total
506.05
ICMS credit = 360.00
Off set rules / Compensation
on special situation
 In some situation we can pay one tax using a existing credit for another tax.
 The basic rule is that the tax credit and the tax payable must be of the same jurisdiction
(Federal or State).
 The most common off set ,is between PIS/Cofins and IPI.
Statute of Limitations
 All taxes are subject to the statute of limitations of 5 years (social security is 10 years).
 In practical terms if no tax assessment is issued then the liability will prescribe based on the
statute of limitations
 Otherwise, if the Tax Authority find any issue during the assessment process, the tax year
related to the this issue remains “opened”.
Tax Incentives
• A wide range of government incentives is available for startup projects in Brazil.
• Usually, incentives take the form of subsidized loan financing (BNDES) and tax
exemptions or reductions.
• Brazilian tax incentives are subject to frequent revisions, then companies that are
planning to analyze the incentive programs should, as a first step, obtain the latest
available information.
Accounting Practices
adopted in Brazil
•
Accounting practices adopted in Brazil (“Brazilian GAAP”) are based on:
• Law 6.404/76 - the basic conceptual framework is provided by the Conselho
Federal de Contabilidade (CFC – Accounting Federal Council).
• Law 11.638/07 - the main objectives of this law is to approximate Brazilian GAAP to
IFRS.
Financial statements required
•
Balance sheets
•
Statements of income
•
Statements of cash-flows (introduced by Law 11.638/07)
•
Statements of changes in retained earnings or accumulated losses
•
Statements of added-value (introduced by Law 11.638/07)
•
Footnotes
•
Statements of changes in shareholders’ equity are required for publicly-held companies.
Accounting Practices
adopted in Brazil
Record requirements
• Companies must record and maintain proper accounting books in Brazilian Portuguese
and values must be recorded in Brazilian currency applying Brazilian GAAP.
• The basic accounting books for legal and tax purposes are the journal book (Diário) and
general ledger book (Razão).
• The other auxiliary books are subsidiary to information contained in the journal and
ledger.
Tax year
•
The Tax year used in Brazil is from January to December.
Chart of Accounting
• The standard chart of accounting used by a company in France can be applied in Brazil.
• Some adjustment needs to be implemented in order the company can follow the local
requirements (example: creation of accounts to control each kind of tax)
Banking communication
Boleto
Company
Customer
Duplicata File
Boleto
Bordero
Bank
Detail about the main
Taxes in Brazil
PIS and COFINS
•
PIS and COFINS are federal taxes charged on revenues, on a monthly basis, under two regimes:
1) Non Cumulative AXIS
Tax rates: PIS = 1.65% COFINS = 7.6%
Taxpayers are allowed to recognize PIS and COFINS credits over certain costs and expenses:
a) products purchased for resale
b) goods and services used as inputs in the rendering of services or manufacturing (excl. labor)
c) consumed electrical power
d) the rental of real state and fixed assets applied in the activities
e) the acquisition of fixed assets
f) return goods
Such credits may be used to offset PIS and COFINS due on their taxable revenue.
This regime is mandatory for companies subject to the actual profit method of computing corporate
income taxes.
PIS and COFINS
2) Cumulative
• Tax rates: PIS = 0.65% COFINS = 3%
• Taxpayers are NOT allowed to recognize PIS and COFINS credits.
• This regime is applicable for certain entities, such as financial institutions and companies under the
presumed profit system, among other entities, and for some revenues deriving from
telecommunications, transport and software development services.
• Revenues related to export transactions and the sale of permanent assets are, in general, exempt
from these taxes.
• There are special PIS and COFINS regimes for companies engaged in some types of industries,
such as automotive, auto parts, cosmetics, pharmaceutical, oil, beverage, packaging materials,
energy, and real state, among others.
• The import of goods and services are also subject to PIS and COFINS at a combined rate of 9.25%.
In some cases, taxpayers may recognize PIS and COFINS credits on the import (ex: purchase of
raw-materials).
PIS and COFINS
Regime for Industrial Companies
COFINS
PIS
Import Finished Goods
Purchase
Sales
Purchase
Sales
2.1%
2.1%
9.9%
9.9%
Manufacture
Purchase
Sales
Purchase
Sales
1.65%
2.1%
7.6%
9.9%
•
According to the Law 10.865/05, the pharmaceutical products are subject to the “single-phase” regime.
•
This regime is:
•
non-cumulative in the raw materials purchase;
•
cumulative when the Pharma company sell the products to the client (special tax rates)
•
the product is exempted of PIS and COFINS, in the next commercial transaction.
Laws n.º
10.147/00
10.637/02
10.833/03
10.865/04
IPI - Imposto sobre Produtos
Industrializados
•
IPI is a federal tax levied on the manufacturing and import of goods. In many aspects, it operates like
a value added tax, which is charged on the value aggregated to the final merchandise.
•
The applicable rate depends on the product and its classification under the IPI tax rates table (TIPI).
The classification within TIPI generally follows the Brussels Harmonized Tax Codes.
•
Each facility (branch) is considered a separate taxpayer for IPI tax purposes.
•
For domestic transactions, in most cases, the taxable event is the exit of the manufactured product
from the facility where it was manufactured. IPI is usually applied on the value of the transaction plus
ICMS tax.
•
IPI taxpayers are entitled to an IPI tax credit equivalent to the tax paid upon the acquisition of the
inputs to be used in the manufacturing process. This credit may be offset against IPI triggered by
subsequent transactions.
•
Under certain circumstances, excess IPI tax credits that cannot be offset against IPI due on
subsequent transactions may be offset against other federal taxes.
•
IPI does not apply on the sale of fixed assets.
•
For imported products, the taxable event is the customs clearance as well as the first exit of the
product from the importer’s facilities (generally the sale). For most products, IPI on imports is charged
on the CIF value plus certain customs expenses and import tax.
ICMS - Imposto sobre
Circulação de Mercadorias
•
ICMS is a state type of value added tax levied on the import of products and certain transactions
involving goods (including electricity), inter-municipal and interstate transportation services and
communication services.
•
The rates vary according with the State and the product (7%, 12%, 17%, 18%, 19% or 25%).
•
Sales of automobiles, communications services and electricity are subject to 25% ICMS.
•
On imports, in general, the ICMS tax base is equal to the CIF value plus the applicable import tax,
IPI, certain customs expenses, the ICMS itself and PIS and COFINS due on the import.
•
ICMS is also due either when a product is resold in the domestic market or when it is physically
removed from a manufacturing facility. The taxable base is equal to the value of the transaction,
including the ICMS itself (gross-up), insurance, freight and conditional discounts.
•
Each branch of a company is considered a separate taxpayer for ICMS tax purposes.
•
In general, ICMS taxpayers are entitled to a tax credit in the amount of the tax paid in the previous
transaction with the same asset (inputs), provided the purchaser is an ICMS taxpayer with respect to
that product, i.e., the subsequent transactions with the purchased product are also subject to ICMS.
The tax credit may be offset against future ICMS payables.
•
If the purchaser is not an ICMS taxpayer, ICMS may become a cost and will not be recoverable as a
credit.
Import Tax
• Import tax applies to the CIF (cost, insurance and freight) value of imported products at variable rates.
• This is a final tax, meaning that no credits are granted.
• The classification of products under TEC determine the applicable tax rate.
• Specific rates depend on the classification of the imported product in TEC (Mercosur’s common
external tariff)
• TEC is based on the Brussels Harmonized Code.
• The taxable event is the customs clearance.
• Other customs fees include minor ones such as a processing fee for the import license, when
necessary, a freight duty which funds the merchant marine fleet (levied at 25% on the freight cost), as
well as miscellaneous port charges.
Taxes on Import
• Brazil imposes federal, state and, sometimes, municipal taxes on the import of goods and services.
• The import of goods is subject to II (import tax or custom duty), IPI, ICMS, PIS and COFINS and other miscellaneous
customs duties.
• The classification of products under TEC (Mercosur’s common external tariff) is crucial to determine the applicable
rate for most taxes. TEC is based on the Brussels Harmonized Code.
(*) According to
TIPI (Tabela do IPI)
and TEC (Tarifa
Externa Comum)
the IPI tax rate for
pharmaceutical
goods is 0%.
The Import tax rate
vary from 4 to18%.
The ICMS tax rate
of São Paulo is
18%.
ISS – Imposto sobre
Serviços AXIS
•
ISS is a municipal tax levied on the revenues derived from the provision of services.
•
Although it is a municipal tax, the services subject to the ISS are listed in federal law (Lei
Complementar 116/03).
•
The tax base is the price of the service and the rates vary from 2 to 5%, according to the municipality
where the service provider is located, where the service is provided and the type of the service.
•
For most services, there is significant debate as to whether the ISS should be paid to the municipality
where the service provider is located or where the service is performed.
•
The taxpayer is, in principle, the service provider. However, the municipal tax legislation may impose
a withholding responsibility to the company hiring the services.
•
As of January 2004, ISS also applies on the import of services. The Brazilian company retaining the
services is obliged to withhold the tax on the service fees paid to the nonresident.
•
Furthermore, Lei Complementar 116/03 introduced an ISS exemption to certain exports of services.
•
When the provision of the service also involves the provision of goods, ISS applies on the total price
of the service, except when there is a specific provision determining the applicability of ICMS on the
value of the goods.
IR and CSLL
• There are two income taxes in Brazil:
• Income Tax (IR or IRPJ)
• Social Contribution Tax on Profits (CSLL)
• They are charged on similar bases;
• There are three methods provided by legislation to calculate IR and CSLL:
• Actual Profit AXIS
• Presumed Profit
• Arbitrated Profit
IR and CSLL
Income Tax – IR or IRPJ
• The income tax regulations in force are consolidated under Decreto 3.000 of March 26, 1999.
• These regulations apply to all taxpayers.
• Only the federal government may charge income tax, however, part of the income tax collected is
transferred to states and municipalities.
• Brazilian corporate income tax is federal tax charged on net taxable income. It applies at a basic rate
of 15%, plus a surtax of 10% on annual income that exceeds R$ 240,000 per year or R$ 20,000 per
month.
Social Contribution Tax on Profits – CSLL
• This tax was introduced to fund social and welfare programs and is paid in addition to the corporate
income tax.
• CSLL is also a federal tax levied on net taxable income and is applied at a rate of 9%. It is not
deductible for corporate income tax purposes. CSLL’s tax base is similar to the tax base of the
corporate income tax.
IR and CSLL
Actual Profit System AXIS
• Under the actual profit system, net taxable income corresponds to the company’s net book profit, arrived at by
applying Brazilian GAAP, adjusted by some inclusions and deductions per Brazilian corporate tax legislation.
• In this sense, under the actual profit system, companies are required to keep appropriated accounting records, an
income tax book (LALUR) and supporting documentation and calculations in order to demonstrate the amount of tax
due.
• Main inclusions relate to non-deductible accounting provisions (provisions deductible are labor social charges or
expenses based on contracts) and non-deductible expense (expenses not related to the core activity of the business,
tax penalties)
• Deductible expenses are generally all items relating to the ordinary business of a company, properly documented and
which are necessary to maintain its source of income. The following are some examples of rules related to the
deductibility of expenses for income tax purposes:
• Depreciation may be charged based on the useful life of the related asset. There is a detailed list of assets
published by tax authorities which contains the accepted depreciation rates. Higher rates may be accepted if
certain requirements are met. In case the company works in two or three shifts, these rates may be increased by
50% and 100%, respectively.
• Deferred expenses – expenses that will benefit future years such as interest paid during the construction and
preoperational phase of a new plant, and expenditures on company reorganization, should be deferred for future
amortization.
IR and CSLL
Actual Profit System AXIS
• Startup expenses should be deferred until the project is operational, at which these expenses
should be amortized over at least five years.
• Technical assistance and royalty payments are tax deductible subject to specific conditions and
limits established by law, which among other things require the approval of the Federal
Intellectual Property Agency (INPI).
• Fines for tax assessment and non-tax related fines are not tax deductible. Tax for late tax
payments are deductible.
IR and CSLL
Presumed Profit System
• Brazilian companies may elect to compute corporate taxes based on presumed net profit, provided they:
•A) do not have total revenues in the preceding year higher than R$ 48 million;
•B) are not financial institutions, similar entities or factoring companies;
•C) do not earn foreign profits, income or gains (i.e. directly or through foreign subsidiaries) and
•D) do not qualify for an exemption or reduction of the corporate income tax.
• The election is made annually, at the beginning of the year and the choice may be renewed every year. The election is
valid for both IRPJ and CSLL. Under the presumed tax regime, the taxes must be calculated and paid on a quarterly
basis.
• The presumed profit is arrived at by applying a certain predetermined percentage, which varies according to the
activity, over the gross sales. The total amount of capital gains, financial revenue and other revenue must be added to
this presumed profit base to compute the corporate taxes. The corresponding tax rates are then applied over the
presumed profit.
• For instance, for the income tax, the percentage for the revenues derived from the sale of products is 8%, while the
percentage for services revenue is 32%. For the social contribution tax on profits, the percentages are 12% and 32%,
respectively.
IR and CSLL
Arbitrated System
• Under certain circumstances, such as inadequate or unreliable record keeping, the tax authorities
may arbitrate profits.
• In this sense, the method is a type of punishment applicable in situations provided for by law.
• The income tax paid on the arbitrated profit is definitive and cannot be offset against future payments.
• The arbitrated profit system is similar to the presumed profit, but with higher percentages to be
applied over the gross sales. In addition, penalties may be charged by tax authorities.
Withholding Taxes
The following withholding taxes can be charged on service invoices (domestic
transactions):
• Income Tax
(tax rate = 1% or 1,5%)
• CSLL
(tax rate = 1%)
• PIS
(tax rate = 0,65%)
• COFINS
(tax rate = 3%)
• ISS
(tax rate = between 2% and 5%)
• INSS
(tax rate = 11%)
CIDE
•
CIDE (Contribuição de Intervenção no Domínio Econômico) is a 10% contribution levied
on payments due to nonresidents in the form of royalties, technical and administrative
services and technical assistance, among others, at a rate of 10%.
•
Differently from the withholding income tax, CIDE is a tax imposed on the Brazilian
payer of the fees and, therefore, may not be reduced by tax treaties and does not
generate a tax credit abroad.
•
There is a limited tax credit granted to the Brazilian entity for CIDE paid on royalties for
the use of trademarks or trade names which reduces the tax’s effective rate (during a
period the tax payer can take a credit of 30% related to the previous payment).
IOF
•
IOF is a federal tax levied on credit, exchange, insurance and securities transactions executed
through financial institutions. The tax also applies to gold transactions and includes intercompany
loans.
•
The IOF is levied at varying rates, depending on the maturity terms and type of transaction.
Credit transactions 0 - 1.5% per day
Securities transactions 0 - 1.5% per day
Insurance transactions 0 - 25% Exchange transactions 0 - 25%
•
For loan transactions in Brazilian currency, the IOF is levied on the average daily balance or on a
transaction basis, at 0.0079% a day when the borrower is a legal entity, limited to 365 times the daily
rate applicable for loans with determined maturing dates.
•
The liquidation of foreign exchange contracts for the remittance of dividends and interest on equity
abroad, is IOF zero-rated.
•
Currently, for foreign exchange transactions, the IOF tax rate ranges from 0% to 5.38% depending on
the type of transaction. The rate is 0.38% for most transactions.
•
IOF is zero-rated on foreign exchange operations related to the inflow of revenue derived from the
export of goods and services and outflow of funds derived from the import of goods. The import of
services, however, is subject to IOF at 0.38%.
Withholding Income Tax
• Withholding income tax applies on certain domestic transactions, such as payment of fees to some
service providers, payment of salary and financial income resulting from banking investments.
• In most cases, the withholding tax is a prepayment of income tax on the entity’s final tax return.
• However, in some cases it is considered a final taxation.
• Also, withholding income tax is due on most nonresidents’ income that has a Brazilian source of
payment (e.g., royalties, service fees, capital gains, interest, etc.).
• According to Brazilian tax law, withholding tax is due upon the payment, credit, delivery, utilization or
remittance of the funds, whichever occurs first.
• The rates depend upon the nature of the payment, the residence of the beneficiary and the existence
of tax treaties between Brazil and the country where the beneficiary is located.
• Most common rates range from 15 to 25%.
Constitutional Principles
Tax related
 Non-Cumulative – (applies to IPI/ICMS/PIS/COFINS) In order to avoid a cascade tax-effect, the taxpayer
is allowed to offset (partially or totally) the tax charged by the supplier.
 Non-retroactive - The Government is forbidden to collect taxes for taxable events that occurred before the
law which instituted or increased such taxes came into force.
 Prospective basis - The Government is forbidden to collect taxes in the same fiscal year in which the law
that instituted or increased such taxes was enacted. For social contributions the term is 90 days.
 Enacted Basis - The Government is forbidden to impose or increase taxes without law duly enacted by
Congress.
QUESTIONS